Module 2 Internal Finance Strategy Flashcards
Define Finance
Finance is the process of obtaining money and using that money to give maximum advantage to the organisation
Market Value of a company =
market price of a share x number of shares
What are the 3 key finance functions?
1) Investing
2) Financing
3) Managing daily financial activities
What are examples of investing?
- Fixed assets
- New staff
- R&D
- Purchase of subsidiary
What is a corporate plan?
A corporate plan is a high-level plan containing the company’s overall vision and mission statement.
What is a corporate financial plan?
The financial plan details how the objectives in the corporate plan are going to be achieved using the available finances.
What factors can affect a financial plan?
1) Environmental constraints
The environment in which the business operates e.gg tax rates, actions of governments …
2) Market quality and structure
Refers to suppliers, customers and competition
3) Product and skills
Technical competency of the entity
Quality of staff
Patents available
What are the four reasons for using management information?
- Planning
- Control
- Decision Making
- Performance Evaluation
What are the key features of business information?
A - Accurate
C - Complete
C - Cost beneficial
U - User targeted
R - Reliable
A - Appropriate
T - Timely
E - Easy to use
The key differences between management and financial accounts include:
1) Management accounts for internal stakeholders whilst Financial statements are for external
2) No statutory requirement to prepare management accounts
3) The format of management accounts is at the discretion of management whereas as financial statements are prepared in accordance with CA2006 or IFRS
What are the four main functional areas of business operations?
- Marketing
- Human Resources
- Operations, which includes manufacturing and production
- Finance
